What You Need to Know about the Government Shutdown


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Congressional Democrats have already capitulated to Republican demands on what level of spending should be enacted to keep the government running.

The last government shutdown, which stretched from the end of 1995 into the start of 1996, happened because the parties disagreed about the size of the spending bills that would keep the government funded. Wherever you stand on that issue, you can logically see how such a disagreement might result in no spending bills being approved and a consequent shutdown of the government.

But this year, Democrats have already agreed to the level of spending proposed by the Republicans, at least in the short-term.

Congress has failed to enact the appropriations bills that are supposed to fund federal government operations (in some cases because Republicans could not support the low funding levels they earlier committed to.) But this happens frequently and is addressed by passage of a “continuing resolution” that provides short-term funding to whatever programs and agencies need it until Congress is able to work something out.

The “continuing resolution” (CR) approved by the Democratic-led Senate would keep the government funded for another six weeks — at the levels demanded by Republicans. As the Center for American Progress has explained, if the spending level of the CR was continued for the whole year it would amount to $986 billion in discretionary spending (the part of government spending Congress must approve each year). That’s roughly the same as the $967 billion called for in the most recent “Ryan budget” (the House budget resolution, named after House Budget Committee chairman Paul Ryan).

That’s considerably lower than the $1,058 billion that the Senate sought to spend in the budget resolution it approved in the spring, and much lower than the $1,203 billion in spending in 2014 that President Obama called for in his first budget proposal.

Once the Republican spending level is agreed to for the short-term CR, it is far more likely that Congress will continue funding the government at that same level for the rest of the year.

Put a different way, Congressional Democrats have basically conceded that sequestration of funding for federal programs under the Budget Control Act (across-the-board spending cuts that no one thinks make any sense) would remain intact for the time being. 

So if the parties essentially agree on the spending level, what is the problem? That brings us to the next point…

Congressional Republicans in the House (or a faction of them) have refused to approve the spending legislation needed to keep the government running unless it also includes provisions on the completely unrelated issue of health care reform.

The House Republicans approved a version of the CR that defunded the Patient Protection and Affordable Care Act (ACA, also known as Obamacare). The health care reform law is not even funded by this spending legislation, and in fact its implementation has proceeded this week even while other parts of the government shut down. In other words, Obamacare is a completely unrelated issue that the House Republicans have tacked onto their CR.

The Democrats in the Senate voted to send a “clean CR,” a CR without the health care provisions, to the House. The House then approved a CR with provisions that would delay for one year, rather than defund, the health care reform. (Many Republicans acknowledged that this delay would eventually lead to repeal of the law.)

In addition to the one-year delay of health care reform, this CR also included a provision that would repeal one piece of that health care reform — a tax on medical devices designed to get some of the businesses that would profit from the law’s expansion of health coverage to contribute to support it. Another CTJ post explains why repealing the medical device tax is a terrible idea.

The Democratic majority in the Senate rejected this Republican House-passed CR as well.

The government shutdown does not actually save money and probably increases the budget deficit.

The shutdown that occurred in 1995-1996 actually cost the government $2 billion in today’s dollars. There are a lot of reasons for this. Furloughed federal workers received back pay for the time they were out of work during the shutdown, but even if federal workers don’t receive back pay this time around, it’s not likely that the shutdown will reduce the deficit. Part of that is because of the various fees (for inspections, visas, entrance at national parks) that won’t be collected, as well as the costs of reopening agencies and programs after they’ve been closed.

A prolonged shutdown could reduce economic output generally — fewer people with paychecks means fewer consumers buying goods, which in turn means fewer profits for businesses and less income for people employed by those businesses. This lost income, and the lost taxes that would be collected on that income, is another reason to worry that the shutdown will increase, rather than decrease, the deficit.

Thank you for visiting Tax Justice Blog. CTJ and ITEP staff will soon retire this domain. But ITEP staff are still blogging! You can find the same level of insight and analysis and select Tax Justice Blog archives at our new blog, http://www.justtaxesblog.org/

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